Archives for April 2012

If the answer is yes you will not qualify for the higher value personal allowances presently available to the over 65s and over 75s.

From 6 April 2013 Age Related Personal Allowances are being phased out. Here’s how the changes will work in practice:

1. If your birthday is after 5 April 1948 you will not qualify for Age Related allowances.
2. If your birthday is after 5 April 1938 but before 6 April 1948 you will continue to qualify for the Age Related Personal Allowance (65 to 74 age group) of £10,500 until this allowance equals, or is exceeded by, the Personal Allowance. For 2013-14 the basic Personal Allowance is due to rise to £9,205.
3. If your birthday is before 6 April 1938 you will continue to qualify for the Age Related Personal Allowance (75 and over) of £10,660 until this allowance equals, or is exceeded by, the Personal Allowance. As mentioned in 2 above for 2013-14 the basic Personal Allowance is due to rise to £9,205.

There is no doubt that eventually all taxpayers over the age of 65 will be disadvantaged by these changes.

In an attempt to ensure that higher rate tax payers make a reasonable contribution to UK tax revenues, new legislation is to be introduced from 6 April 2013 that limits access to certain tax reliefs. Taxpayers will be denied relief(s) if the claim exceeds 25% of their income or £50,000, whichever is the greater.

This will not affect tax reliefs which are already capped such as Enterprise Investment Scheme and pension reliefs, but may affect “open-ended” reliefs such as interest relief on qualifying loans and gift aid relief. The Chancellor has said that he will consult to make sure that charities are not negatively affected by such a move.
Ironically, this may mean that tax planning opportunities available to 50% rate tax payers in 2012-13, may produce more tax savings than if applied, and capped, in 2013-14 when the top rate of tax is reduced to 45%.
50% tax rate payers therefore have one more fiscal year, 2012-13, to take advantage of certain, unlimited reliefs.

How much Stamp Duty Land Tax will you pay when you buy residential property in the UK following the Budget?

Firstly the extension of the nil rate band to £250,000 for first time buyers ceased 24 March 2012.

The current Stamp Duty Land Tax (SDLT) rates are:

Residential property purchased outside disadvantaged areas

Zero charge – £0 to £125,000
1% charge – £125,001 to £250,000
3% charge – £250,001 to £500,000
4% charge – £500,001 to £1,000,000
5% charge – £1,000,001 to £2,000,000
7% charge – Over £2,000,000
15% charge – on properties over £2m held in a “corporate envelope” (see below)

The 7% and 15% charges were introduced in the Budget last month. The 7% charge applies to property purchases completed after 22 March 2012.

The 15% charge has been introduced to counter a tax device that aimed to avoid SDLT charges on high value residential property purchases. The scheme involved purchasing through offshore companies, so-called “corporate enveloping”. The 15% charge will apply from 21 March 2012. In his Budget speech George Osborne made it clear he would close any variants of the scheme that are created in the future; if necessary the Government would introduce retrospective legislation.

Residential property purchased in a disadvantaged area

If a property you are purchasing is inside one of the 2,000 disadvantaged areas you may qualify for Disadvantaged Areas Relief. The only change to the SDLT rates listed above is to the nil rate band. If a property is located inside a disadvantaged area the nil rate band applies to property transactions up to £150,000. The 1% charge is adjusted accordingly, and applies to the band £150,001 to £250,000.

If you want to see if a property you are about to purchase qualifies for Disadvantaged Areas Relief you can use HMRC’s search tool at http://www.hmrc.gov.uk/so/dar/dar-search.htm